Markets continue to show rolling areas of stress butnot rising contagion. Entering the NA open, FX vol is off its highs; after yesterday’s VIX (S&P volatility) rose to a fresh 7‐month high; while EM FXis relatively calm (TRY, ZAR and HUF are all up 1%+) as the Japanese Nikkei equity index was hit with a significant 4% drop yet JPY is down 0.4% as oppose to higher (see bottom chart for the sudden disconnect between USDJPY and the Nikkei). The US 10‐year is trading at 2.59%, off itslows but still reflecting demand for safe haven as oppose to yield. Accordingly, markets are exhibiting a jittery backdrop driven by strains inEM and complicated by a disappointing run of US data (including yesterday’sISM) but not rising contagion. This puts building pressure on Friday’s nonfarm payrolls. Today, there are two Fed speakers, Lacker (nonvoting hawk) and Evans (non‐voting dove); whose comments should balanceeach other out; as well as factory orders.
Read the full report: FX Daily
Scotiabank